SYDNEY - [AAP] Lending to property investors took its biggest monthly fall in more than two years in September, a further sign of a cooling housing boom.

The value of home loans to investors fell 6.2 per cent in the month to $11.8 billion, seasonally adjusted data from the Australian Bureau of Statistics showed on Thursday.

The sharp decline has more than made up for unusually strong lending in August, JP Morgan economist Henry St John said.

"Investor lending was unambiguously weak in September, and provides further evidence that August's modest uptick against the trend was more noise than anything else," he said.

"The bearish trend in investor lending since April is well-established now, and these numbers will weigh on investor credit growth over the coming months."

The Australian Prudential Regulation Authority (APRA) moved to cap interest-only mortgage lending in the last week of March, prompting a round of rate increases from banks that made interest-only and investor loans more expensive.

Loans to owner-occupiers slipped 2.1 per cent in September, dragging overall housing finance 3.6 per cent lower to $32.5 billion in the month.

The number of home loan approvals dropped 2.3 per cent in September, missing market expectations for an increase of 1.5 per cent.

The lending data and recent falls in auction clearance rates suggest the housing market will cool further in the remainder of 2017 and into 2018, ANZ economist Daniel Gradwell said.

"We believe the regulator/RBA and state governments will be encouraged by the slowdown in investor borrowing and improved access to the housing market for first home buyers, respectively," he said.

The data triggered a brief fall in the Australian dollar, which slipped to a low of 76.64 US cents, but has since recovered to be at 76.82 US cents by mid-afternoon.

 

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